David J. Teece and Aurelien Portuese argue that short-term thinking in American corporate governance, antitrust, and regulation is hampering American innovation and success even as other countries invest in their firms to dominate frontier markets.
American capitalism is at a crossroads. For decades, it has followed a flawed strategy: prioritizing short-term profits, appeasing shareholders, and narrowly focusing antitrust policy on maintaining low prices. This strategy has produced temporary gains while undermining innovation, corporate resilience, and the United States’ long-term economic competitiveness.
The need for change could not be more urgent. State-supported enterprises in China are rapidly developing long-term strategies in artificial intelligence, 6G technology, and green energy. Meanwhile, the U.S. regulatory bodies, and too often corporations themselves, prioritize short-term “here and now” objectives, but often at the expense of other constituencies and longer-term shareholder value. The “financialization” of great companies like Intel and Boeing, most markedly through decades of policy prioritizing efficiency, lower costs, and large stock buybacks over innovation and quality, has resulted in massive tragedies for consumers, employees, innovation, U.S. global leadership, and also shareholders.
As the Trump administration begins its new tenure, it has an opportunity to reset the foundations of American capitalism. By cutting the bureaucratic red tape that hampers American companies’ ability to innovate and experiment, and by appointing policymakers who value long-term thinking in corporate governance and antitrust enforcement, the administration can promote innovation, maintain economic leadership, and respond strategically to China’s rise. To do so, we need to build and reward the dynamic capabilities of American companies. At the same time, we must reverse the process of financialization and push companies to reinvest capital, not distribute it.
Short-Term Thinking: Corporate Achilles’ Heel
Corporate America is caught in a destructive cycle of short-termism, with executives rewarded for quarterly stock performances at the expense of long-term investments. Nowhere is this more evident than in the technology industry. Consider the case of Nvidia. Despite tremendous results in the sales of its innovative chips, and despite the critical importance for a U.S. company to fiercely compete with Chinese competitors, Nvidia recently announced using $11 billion in cash to buy back stocks to appease shareholders. It should have reinvested these profits into developing AI chips and operational fortitude at a time when bolstering innovation and security is critical to outrun China’s own rapid innovation and reduce supply chain risks that shuttered globalized operations during COVID and raised prices for businesses and consumers. This retreat from future-planning reflects a larger failure to look beyond the demands of shareholder activists who are usually short-termers only interested in a quick buck. In doing so, Nvidia risks going down the path of Intel and Boeing, who spent decades of profit on multiple buybacks instead of research and development and quality maintenance and are now competitively stricken.
Another example: Apple underinvested in the artificial intelligence revolution and is now a bit player. To try and catch up, Apple announced a joint venture with Open AI. At the same time, it announced an unprecedented $110 billion stock buyback. Apple has been forced to depend on an AI startup to secure a position in the most important and rewarding frontier market when it should have been an AI pioneer itself. The $110 billion buyback underlines Apple’s flawed corporate strategy and self-inflicted dependency on competitors to access the next important markets.
Prioritizing dividends and buybacks when there are rich opportunities to invest for the future is an unfortunate corporate choice that undermines workers and the global competitiveness of American capitalism. Investments that could fuel Nvidia’s and Apple’s growth are being pushed aside in favor of short-term rewards for shareholders and today’s management. The consequences of this mindset are obvious: less innovation, fewer bold bets on transformative technologies, and a gradual loss of America’s technological leadership and competitive advantage in global markets.
Antitrust Policy: Focused on Wrong Metrics
Short-termism does not only plague corporate directors and shareholder activists (who are really stock traders in disguise). Regulators too often take the short view, too.
Antitrust enforcement, another cornerstone of American capitalism, has become shortsighted. For far too long, regulators have relied on static models that prioritize maintaining low consumer prices while ignoring the critical importance of encouraging innovation.
The Federal Trade Commission’s recent lawsuit to halt Amgen’s acquisition of Horizon Therapeutics is a prime example. The FTC claimed that the merger would stifle competition in rare disease treatments, but it overlooked Horizon’s dynamic capabilities—its ability to innovate and bring life-saving drugs to market faster using Amgen’s resources. This emphasis on immediate competition over long-term innovation exemplifies a regulatory framework stuck in the past.
The concept of “dynamic capabilities” provides a useful lens for understanding competition. Dynamic capabilities recognize that businesses succeed by constantly innovating, adapting, and establishing entirely new markets. This viewpoint shifts the focus of antitrust from static concerns about market share to a broader assessment of how mergers and business strategies can spur future innovation.
A Strategic Threat from China
Short-term thinking is not only an economic issue; it also poses a national security risk. While America dithers, China is carrying out a decades-long strategy to dominate industries such as AI, quantum computing, and renewable energy. China’s state-directed capitalism encourages companies to think strategically, with the government providing subsidies, infrastructure, and protection for long-term investments.
Consider China’s electric battery building sector. BYD, the country’s leading electric vehicle manufacturer, has made significant investments in building a vertically integrated structure, which includes everything from battery production to software development. This strategy positions BYD to dominate the global EV market, whereas American companies are hampered by fragmented supply chains and a lack of long-term support. In the U.S., the leading EV manufacturer—Tesla—has until now been either snubbed or sued by the administration. It may change—likely too little, and too late. China is setting global benchmarks for AI innovation and adoption. The government’s strategic investment in AI talent and infrastructure, combined with reduced regulatory barriers, has enabled companies such as Huawei and Baidu to compete aggressively on a global scale. If the U.S. does not take a long-term approach, we risk losing leadership in these critical industries, with serious consequences for our economy and national security.
A New Vision of American Capitalism
The Trump administration has an opportunity to drive a much-needed transformation. To facilitate long-term strategy by corporate America and by regulators, the red-tape needs to be cut—early signs are encouraging. More so, by prioritizing stewardship through better management and governance, modernizing antitrust enforcement, and lowering regulatory barriers, the U.S. can build a 21st-century economic colossus.
In corporate governance, we need to encourage boards of directors to prioritize long-term growth over pandering to activist investors. One approach would be to change executive compensation structures to reward long-term performance, not including performing past their own tenure when the chickens come home to roost.
In antitrust, regulators must abandon static metrics such as price effects and embrace a dynamic competition framework. This entails asking how business strategies, mergers, and market behavior will affect innovation and consumer welfare over decades, not just years. For example, allowing mergers that create innovative ecosystems, such as Nvidia’s acquisition of Arm (which was blocked due to antitrust concerns), could help America maintain its technological lead in semiconductors.
Finally, we must simplify regulatory processes to promote entrepreneurship and investment. This includes streamlining infrastructure project approvals, lowering compliance burdens for small businesses, and encouraging R&D in strategic sectors.
Authors’ Disclosures: The authors declare no conflicts of interest. This article did not receive any external funding or prior approval. The authors have, in their private practice, provided consulting services to certain technology companies.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
